Opposition states voted differently for GST compensation, 21 states opting for option number 1

New delhi date. 21 September 2020, Monday

Opposition states are witnessing controversy in the ongoing controversy over GST rebates. 21 states have accepted the first option offered by the central government, namely a loan of Rs 97,000 crore. Opposition states have not yet accepted any of the Centre's proposals.

Which are the two options

In the 41st meeting of the GST Council held this month, the states have given the Center two options regarding compensation. The states were asked to submit their views within a week, but so far the states have not responded.

The first option

Under the first option, the states had said that they were losing Rs 97,000 crore so far due to GST alone. So they take this amount as debt under the guidance of the Ministry of Finance. In the same way, the states will get money every two months in the same way as they were compensated till now.

Another option

In the second option, it was said that the state would fully borrow the GST revenue loss (including the loss from Corona) which is about Rs 2.35 crore. For this also special facility will be arranged with the help of Reserve Bank.

Which states chose the first option

According to the Ministry of Finance, Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Karnataka, Madhya Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Odisha, Puducherry, Sikkim 21 states and Union Territories like Uttarakhand and Uttar Pradesh have opted for the first option. Manipur first chose the second option, but later changed and chose the first option.

According to sources, the state may inform the finance ministry about its option in a day or two, but some states, including the opposition, are confused. The opposition-ruled state has been opposing the government's proposal since day one. But now the majority of the GST Council seems to be accepting the Centre's proposal. This step can be very difficult for him. Jharkhand, Kerala, Maharashtra, Delhi, Punjab, Rajasthan, Tamil Nadu, Telangana and West Bengal have not yet responded to the GST Council's proposal.

Why is compensation given?

As per the rule, the loss of revenue of the states from GST is paid by the Central Government. In view of the financial year 2015-16, it was decided that the states would calculate an additional 14 per cent per annum on these protected revenues.

GST was introduced in the year 2017. Under the GST Act, the states were given full assurance that any loss incurred for the first five years would be paid to them. However the states will be compensated for any loss of revenue by July 2022.